Price & Promotion

Gain insights into improving your trade strategy

A brand’s success ultimately depends on its trade strategy. The stakes are high and not all pricing and
promotion strategies are equal. Making a mistake can result in declining market share, lost revenue, and
damaged retailer relationships. Setting the right price and implementing the optimal in-store promotions
are fundamental to achieving your volume, profit, and strategic goals.

To meet the needs of today’s with Competitive Price Gap Analysis,

Trade Promotion Sales Lifts including
Benefits
marketplace, manufacturers need
Category and Competitive Impacts • Grow your brand by
to: accurately planning volume,
• Ability to evaluate specialized
• Enable brand growth by establishing profit and strategic events
promotions such as Multiple
prices and promotions that maximize • Improve your pricing strategy
Purchases (BOGOFs or n-fors), Co-
profit by consistently evaluating
promotions/Linksaves, Multi vs.
• Eliminate costly risks, by utilizing and verifying your plans and
Single Pack, Extra Free, Loyalty and
time-tested and industry accepted tracking store level execution
other 3rd Party Promos
models • Gain retailer acceptance and
• Geographic flexibility to analyze at a
Nielsen Analytic Consulting Price & internal buy-in with better
region, retailer, account, or custom
Promotion solutions help manufacturers analysis and measurement
geography where appropriate based on real market effects.
determine the best pricing strategy and
• Simulation software for “what-if?” • Develop optimal trade plans
trade promotion tactics by examining the
scenario recommendations by using the simulation
effects of price and in-store promotions
on sales and profits. Using a proprietary, • Compatibility with software to create predictive
store-level modeling approach (superior decisionSMART™ Business Assessor scenario analyses.
to “aggregate” methods), our models have online monitoring and analysis tool
access to a robust database of stores-
allowing us to separate the impact of
price and promotion from outside Net Volume Net Profit

interferences such as distribution,

seasonality and store differences. Our
consultants use a customized approach to
each project; working with you to design
a solution unique to your objectives and
needs.
% Change

Optimize Profit
Features:
• Precise cause and effect measurement
using data at the store-by-store, week-
0% -1% -2% -3% -4% -5% -6% -7% -8% -9%
by-week level.
• Advanced analyses and
recommendations including: Trade
Execution Facts such as feature and Price Reduction
display , Price Sensitivity/Elasticity,
Price Threshold, Price Relationships
Case Study: Forecasting the impact of a price increase

Situation: Crispy Os Price Elasticity Chart

BranCo needs to increase the price of
East West
their leading cereal brand Crispy Os to
500g 1Kg 500g 1Kg
keep pace with rising production costs. -2.5

Regular Price Elasticity

-2.25
Their goal is to accurately predict the -2.00
-2.15
-2 Avg = -2.00
amount of volume and profit at risk of -1.50
-1.5
increasing the regular, everyday shelf
-1
price by 5%.
-0.5
Solution: 0

The Price Elasticity chart helps BranCo Crispy Os “vs. Competitors”

understand how sales are impacted by the
price increase (Figure 1). The average
elasticity of Crispy Os (-2.00) shows that
this brand is very sensitive to price Crispy Os Promotion Lifts

changes. BranCo can forecast that their 800%

TPR Feature Display F&D
5% price increase will result in an overall 700%

regular volume loss of about -10%. 600%

Upon further investigation of this price 500%

elasticity, we found that a significant
Lift =
price relationship exists between their
400%
391%
500g and 1Kg packages. We can use this 300%

knowledge to determine the optimal 200%

Lift =
price gap between the two sizes and 100% 132%
maximize total brand sales. Finally, we
found that regional differences in price
0%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
sensitivity have implications for % Discount
forecasting after-the-price increase.
Optimizing Trade Promotions
BranCo has forecasted a -10% decrease The Trade Promotion Sales Lift chart With the sales lifts of their in-store
on regular volume due to their price shows that Feature or Display promotions quantified, BranCo can now
increase. To alleviate some of the volume promotions can nearly double the sales incorporate costs to calculate ROI and
impact, Crispy Os trade promotions need achieved with just a Temporary Price make better tactical trade decisions so
to drive more volume. Reduction (Figure 2). In addition, that they can grow their brand and off-
separating the impact of the price set the lost volume as a result of the price
discount from the impact of the feature increase.
ad and the display, allows BranCo to
make better decisions when determining
the need for “quality” trade support.
For more information, contact your
Nielsen Analytic Consulting
representative or visit our website at
www.nielsen.com

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